"Trigger of Coverage" Standards For Occurrence and Accident Based Insurance Policies

In a recent decision, the New Hampshire Supreme Court addressed, for the first time, which "trigger of coverage" standard should be applied under New Hampshire law to determine the point at which an "occurrence" or "accident" causing "property damage" took place within the meaning of occurrence and accident based insurance policies. EnergyNorth Natural Gas, Inc. v. Underwriters at Lloyds, 2004 WL 868282 (April 23, 2004). The Court adopted either an "injury-in-fact" or "exposure" standard based upon its interpretation of the specific policies before it.

The Court’s decision came in response to a certified question from the United States District Court for the District of New Hampshire which was handling various declaratory judgment actions concerning a gas utility‘s request for insurance coverage for the investigation and remediation of the sites of certain manufactured gas plants (MGPs). The MGPs had begun operating before 1900 and were closed in 1952. The utility claimed that environmental contamination migrated over time, resulting in further damage. The insurers had issued various comprehensive general liability (CGL) insurance policies, the first of which became effective in 1958 and provided coverage for different policy periods until 1983.

The Court began by discussing the four generally recognized approaches to trigger of coverage: 1) manifestation; 2) injury-in-fact or actual damage; 3) exposure or 4) continuous trigger and the rationale for each approach as articulated by other courts. The Court then considered three different types of policies.


1. Occurrence Based Comprehensive General Liability Policies Which Required Property Damage During The Policy Period.

The Court determined that "injury-in-fact" was the appropriate trigger for these policies. Among other factors, the Court found such a trigger consistent with the drafting history of standardized CGL policy language. In that regard, the Court cited with approval the interpretation of such standardized language in Cessna Aircraft Co. v. Hartford Acc. & Indem. Co., 900 F. Supp. 1489 (D. Kan. 1995) and Quaker State Minit-Lube, Inc. v. Firemen’s Fund Ins. Co., 868 F. Supp. 1278 (D. Utah 1994), aff.d 52 F.3d 1522 (10th Cir. 1995). The Court concluded that the language of these occurrence based policies distinguished between the causative event an accident or continuous or repeated exposure to conditions and the resulting property damage which must occur during the policy period and be the product of an accident or "continuous or repeated exposure to conditions." Where contamination, as it was alleged regarding the MGPs, was on-going, injuries-in-fact also continue.


2. Accident Based Policies Which Required That The Accident, Not Necessarily Property Damage, Take Place During the Policy Period

The Court relied on its earlier ruling in Hudson v. Farm Family Mutual Ins. Co., 142 N.H. 144 (1997) which held that an injury caused by gradual and continuous exposure to electrical voltage triggered coverage under a policy covering "sudden and accidental damage" because "sudden and accidental" could reasonably be construed as "sudden and unexpected." Accordingly, these accident based policies were triggered by accidents occurring within the policy period, not limited to a single discrete event. The Court found the policies embodied an exposure trigger and where alleged migration of toxic wastes continued, multiple exposures triggering coverage also continued.


3. An Occurrence Based Policy Defining Occurrence As One Happening Or Series Of Happenings Arising Out Of Or Due To One Event

The Court interpreted the term "happening" in this policy as consistent with the term "accident" and similarly did not require a temporal component. This language, the Court ruled, embodied an exposure trigger and where the alleged migration of wastes was continuing, could result in multiple exposures triggering coverage.

The question certified by the district court did not ask the Court to address the issue of allocation among the various policies. That issue will have to be resolved at some later date in these or other cases.

Margaret H. Nelson (mnelson@sulloway.com)